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Mondale Visit Last Week Underlined U.S. Interest

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WASHINGTON — There is oil beneath the 900,000 square miles of the South China Sea, possibly a lot of oil. But nobody has the murkiest idea how large the reserves are or how much might eventually be recoverable, and the coastal countries lack resources and knowhow to get at offshore oil.

Students of World War II recall that Japan launched its great offensive in the Pacific nearly 38 years ago with the primary purpose of securing oil supplies for its military machine from the Dutch East Indies — just as Hitler was striking eastward to get at the Russian oilfields around the Crimea.

Last week a “significant” gas discovery off the coast of Trengganu, Malaysia in the South China Sea was announced by the Exxon Corporation which already produces 103,000 barrels of oil a day there. In view of other reported oil discoveries along the perimeter of the South China Sea, and production of high quality oil near the Philippine island of Palawan, strategy‐minded officials are evaluating the potential for new conflict over oil supplies in contested waters.

Territorial disputes involve the offshore claims of Vietnam, China, the Philippines and Taiwan. They are mostly a heritage of 19th century colonial struggles over tin and rubber.

The American interest in the South China Sea is twofold. The United States is interested in any area that can help supply an energy‐hungry world. (Crude oil became China's leading export to the United States, valued at $42.7 million, in the first half of 1979.) Also, hardly anything can be taken off the bottom of the sea without the deployment of sophisticated American drilling equipment and offshore rigs. Last week in China Vice President Mondale visited a factory making oil exploration instruments with components from Texas Instruments.

The disputes over who owns what have become sharper since China's punitive invasion of Vietnam six months ago. Both countries claim the Spratly and Paracel archipelagos, accusing each other of “expansionist and hegemonistic ambitions.” No oil has been found in either archipelago as yet, but the heat of the exchanges has caused concern among the American, West European and Japanese exploration companies working in the South China Sea.

The most likely place for conflict, according to United States specialists, would be in the Gulf of Tonkin, a thumb of water bordered at virtually equal lengths by Vietnam and China. They emphasize, however, that at no time during the frontier war last spring were naval units of the two sides engaged, even when land fighting approached the gulf. Also, China's extensive seismic surveys and less extensive exploratory drillings there have been strictly confined to Chinese territorial waters.

Vietnam appears to have withdrawn, for now, from the oil hunt, after having raised such “maddening” bureaucratic barriers, as one American oil expert described it, that Western companies intent on developing offshore production pulled up stakes and went home. This leaves dormant Vietnam's promising sea field 214 miles south of Vung Tau, where Shell made a commercially valuable strike in 1974.

Beyond verbal support for Hanoi's offshore claims, the Soviet Union, doesn't seems to be able to be much help. Moscow's sea‐drilling capabilities are limited to shallow waters, according to American specialists. They also doubt that the Soviet Navy, however large, is capable of defending Hanoi's claims, even though it has recently sent large warships to Vietnamese ports. Vietnam lacks naval strength, and the United States embargo continues to deny the Hanoi Government access to oil exploration technology.

China, however, has been steadily enlarging its navy. In 1974 it carried out an amphibious landing in the Paracels, driving out a South Vietnamese occupying force. Chinese sea patrols have increased in the region, and Administration officials regard the Chinese‐Vietnamese dispute over the Paracels as “a dead issue,” leaving China in control.

In the Spratlys, China, Vietnam, the Philippines and Taiwan each define the lengthy spattering of tiny islands in their own way. The Philippines, which is closest, has begun exploratory drilling on the adjacent Reed Bank. China, 700 miles distant, would have a hard time backing up claims.

However, American specialists note that Taiwan has maintained a military base in the Spratlys which could presumably figure in China's claims if oil is found. Recently Peking has indicated a degree of flexibility in defining its offshore claims in the East China Sea with regard to Japan and Taiwan, implying that it might seek cooperative arrangements in exploiting the seabed off the Senkaku Islands and, by extension, with Taiwan. American specialists believe that any such disputes would have to be mediated bilaterally, regardless of the treaty now being negotiated in the United Nations Law of the Sea Conference.

Even considering China's intensifying search for offshore oil — with some 30 companies surveying and drilling from the waters of Hainan Island to Bohai Bay, opposite Korea — Ameri can oil experts do not foresee commercial production for any of the seafields until late in the 1980's. Specialists also voice skepticism over China's repeated claims of large new finds that would boost its reserves to 100 billion barrels — a claim most recently conveyed in Peking last month by Senator Henry M. Jackson, Democrat of Washington. The Administration estimates that China may have 80 billion barrels of reserves — 40 billion onshore and 40 billion offshore — but not all is readily recoverable or of desirable low sulphur character. “It is ridiculous to speculate in terms of a bonanza,” said one specialist. “But there may be enough in the South China Sea to make it interesting.” Another expert said it would be more practical to exploit the known onshore reserves before going heavily into offshore drilling.

A version of this archives appears in print on September 2, 1979, on Page E2 of the New York edition with the headline: Mondale Visit Last Week Underlined U.S. Interest. Order Reprints|Today's Paper|Subscribe